You don't get a direct say in a company's day-to-day operations, but, depending on whether you own voting or non-voting stock, you may have a hand in shaping its board of directors and deciding on special issues.

Voting Stock – If the stock you own is a voting stock and you're a shareholder on record when a decision must be made through a vote, you have a right to vote on the issue. The right to vote for a member on the board of directors or on a specific business decision is similar to the right to vote for a U.S. senator or on a political issue in a plebiscite: you don't have to vote if you don't want to, and you don't really get a direct say in daily government operations (although you do vote on the people that do). The one main difference between voting as a citizen and voting as a shareholder is that if, as a shareholder, you choose not to submit your vote, there is the possibility that a default choice will be made regardless of your true desires. Be sure carefully to read the fine print on the proxy form sent to you.

Non-Voting Stock – A non-voting stock doesn't allow you to participate in votes affecting shareholders and the company. These types of shares are created so that investors who forfeit the right to have a say in the direction of the company are able to participate in the company's profitability and success.

Not all companies offer these two different types of stock, and not all types of voting stock have the same voting rights. If you are interested in playing a part (albeit a very small one) in the decision making processes of a company, make sure you buy the right type of stock.

Warren Buffett's Berkshire Hathaway presents a real life example of a voting vs. non-voting share situation. The company has two classes of stock, Class A (denoted by the ticker symbol: BRK.A) and Class B (denoted by the ticker symbol: BRK.B). A Class B stock trades at 1/30th the price of a Class A stock; however, it only carries 1/200th of the voting rights.

If you would like to learn more about stocks and the stock market, check out this Stock Basics Tutorial. For more on the issue of shareholder rights, check out this Knowing Your Rights As A Shareholder and What is the investor rights movement?



comments powered by Disqus
Trading Center